While the Financial Services sector has been hammered in 2019 amid ongoing Royal Commission scrutiny and tightening lending growth, one share price has been rocketing higher: Magellan Financial Group Ltd (ASX: MFG).
The Magellan share price is up over 50% to $36.07 per share so far this year as it has outpaced fellow wealth managers Janus Henderson Group PLC (ASX: JHG) and Platinum Asset Management Ltd (ASX: PTM) which are up 18% and 13%, respectively.
Magellan has proven to not only outperform the Financial Services sector as a whole, but also sit high amongst the S&P/ASX200 Index (ASX: XJO) gainers for the year-to-date and is up nearly 1% today as the Aussie market has traded relatively flat.
What’s driving the Magellan share price higher?
The international equities manager has been buoyed by a better-than-expected result on the legal and regulatory front for the wealth management sector in the wake of Kenneth Hayne’s Royal Commission recommendations.
While this has been a big boost for the share price, following significant declines in the last 12-18 months amid bad press and fears of reduced growth prospects, Magellan has also managed to retain and even grow its half-year average funds under management (FUM). For the half-year ended 31 December 2018, management expected to see average FUM come in at $72 billion, compared to $53.6 billion in the prior corresponding period (pcp).
The investment group has forecast double-digit profit growth for FY19 despite challenging conditions in global equity markets and headwinds including Brexit and the US-China trade war looming in Q2 2019.
Magellan has looked cheap for quite a while and currently trades on a 19x price-earnings (P/E) multiple with a 4.55% dividend yield that looks quite attractive from a relative value perspective.
Is Magellan a Buy?
I think that while Magellan has bounced back strongly to start the year, I wouldn’t be jumping in just yet. There’s a lot of volatility still to come in the months ahead particularly with the Federal Election coming up and the potential for significant regulatory changes to wealth management under a Labor government.
In the meantime, investors hunting for the next hot stock should check out these top growth shares that have been tipped as market beaters.
Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Platinum Investment Management Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.